I.

INTRODUCTION

Public International Law (or International Law) is a set of laws that regulates interaction
between States. Over the years, the scope of International Law has increased dramatically.
International Law has expanded to regulate specific international activity such as trade and
investment, environmental protection, human rights to scientific and technical cooperation.
This expansion has led to emergence of fragmented and highly specialized regimes
possessing their own principles and institutions. This phenomenon is known as fragmentation
of international law1.

The aim of the paper is to study investment protection in relation with armed conflict and not
against the overarching backdrop of hostilities. This means that, every measure taken by a
war-torn State vis-à-vis foreign investments in the geographical territory is not directly
related to the armed conflict it is engaged in. For instance, Israel may take certain regulatory
steps towards promotion of public health or in line with its environmental goals that
adversely affect foreign investments. These measures need not have anything to do with
conflict in Gaza or northern border.

There are several ways in which international humanitarian law and international investment
law might be in tension. The present paper specifically deals with the interplay of ‘full
protection and safety’ investment protection standard, the principle of military necessary and
obligation of states to protect private property especially property owned by aliens. Secondly,
in the event property of aliens is destroyed or damaged as an effect of hostilities, to what
extent can states use it as a defence during investment arbitration.

These issues take contemporary relevance for two-fold reasons: (i) the evident lack of
scholarship about regime interaction between IHL and international investment law; (ii) the
growth in Bilateral Investment Treaties and increase in assertion of investment claims
through Investor-State Dispute Settlement Mechanism (“ISDS”).

RESEARCH QUESTIONS

1. Whether and to what extent treaty standards for investment protection apply during
armed conflict.

1
International Law Commission, Fragmentation of International Law : Difficulties Arising from the
Diversification and Expansion of International Law, (UNGA, A/CN.4/ L.702, 2006)
https://legal.un.org/ilc/documentation/english/a_cn4_l702.pdf. Fragmentation is understood to have both
positive and negative consequences.
2. Whether and to what extent can States use hostilities as a defence in investment
arbitration.
 II. OBLIGATIONS OF HOST STATE VIS-À-VIS INVESTMENT
PROTECTION DURING ARMED CONFLICT

Article 1(1) of the UN Charter, states that the function of the United Nations is to ‘maintain
international peace and security’. Article 1(2) delineates the objective of the organisation as
one to ‘develop friendly relations among nations based on respect for the principle of equal
rights and self-determination of people. Article 1(3) goes a step ahead and extends this
principle to respect for rights of individuals, stating that the UN aims to: ‘achieve
international co-operation in solving international problems of an economic, social, cultural,
or humanitarian character, and in promoting and encouraging respect for human rights and
for fundamental freedoms for all […]’. Furter article 56 casts an obligation upon members to
take joint and separate action in co-operation with organisation for the achievement of
economic and social objectives inter alia.

ILC in the Articles on the Effect of Armed Conflict on Treaties 2 (the “2011 ILC Articles”)
propose that the outbreak of hostilities does not automatically abrogate treaties. Further,
Article 73 of the VCLT provides that the VCLT ‘shall not prejudge’ a question that may arise
with respect to a treaty from the outbreak of hostilities. State practice as emerged in the latter
half of the 20th century, as inferred from stances before international tribunals, endorse the
view that Friendship, Commerce and Navigation Treaties (former version of the modern
Bilateral Investment Treaties) are not instantly invalidated by armed conflict3.

Against this background, the focus of this chapter lies on the responsibility of conflict-
affected host States to safeguard foreign investments under their jurisdiction against the
detrimental impacts of hostilities. This includes scenarios where the host State initiates an
attack against its adversary, leading to harm caused to the investor's assets, as well as
situations where the host State is targeted by an attack from a third party, resulting in damage
to foreign investments that fall within the jurisdiction of the host State.

ICJ's Nuclear Weapons Advisory Opinion 765 stated that the meaning of "arbitrary
deprivation of life" under Article 6 of the International Covenant of Civil and Political Rights
during times of armed conflict can only be determined by referring to the relevant law of
armed conflict, and cannot be inferred solely from the Covenant's provisions. Similarly, it

2
GA Res. 66/69 (Dec. 9, 2011).
3
Oil Platforms (Iran v. U.S.), Written Pleadings, Memorial of the Government Submitted by the Islamic
Government of Iran (June 8, 1993). See also, Military and Paramilitary Against Nicaragua (Nicar. v. U.S.)
Jurisdiction and Admissibility, 1984 I.C.J. Rep 209 (May 14).
could be contended that the standards of feasibility outlined in IHL should guide the
determination of what is deemed "reasonable" in terms of precautions or "full protection and
security" during armed conflict.

The Full Protection and Security (“FPS”) standard is included in many investment treaties.
Various treaties contain different formulations of the standard. Some treaties refer to “full”,
others to “full and complete”, “(most) constant”, or “continuous” protection and security.
However, in practice, semantic variations do not have a bearing on the interpretation of the
standard.

Though the standard accords a “physical” level of protection to the investment, opinion is
divided on whether “legal” protection is envisaged in the scope of the standard. Arbitral
tribunals have been careful to limit the exposure this standard pose to States. In AAPL v.
Srilanka, the tribunal rejected the contention that FPS represented a strict liability obligation.
Further, consensus is that FPS casts a relative obligation on a state in a manner that pays ‘due
respect’ to the State’s level of development and stability. In Pantenchniki v Albania, the
tribunal explained that a different level of protection is expected from a powerful and well-
established state as opposed to that from a fragile or weak state with limited capacity.

It is settled law that FPS casts a due diligence obligation on the host state. It is also referred to
as an obligation of vigilance. In this context, a standard of reasonable care is applicable, i.e., a
state must take all practical and practicable measures to protect the investment. It is not an
omnibus protection from every injury.

Like the FPS standard, States have an obligation to protect property and take precautionary
measures under IHL as well. Since IHL's primary purpose is to uphold the protection of
civilian persons and objects from the consequences of hostilities, even when a lawful attack
on a military objective is carried out, IHL imposes additional limitations in the form of
precautionary measures. Both the attacking party and the party being attacked are required to
take these measures to prevent or minimize collateral damage to civilian persons, the civilian
population, and civilian objects. These obligations are considered customary IHL and are
mainly codified in API Articles 57 and 584.

As long as foreign investments are not utilized for military purposes, they are considered
civilian objects and are prohibited from being directly targeted in times of conflict. The host
State is responsible for taking precautionary measures to safeguard these investments from
4
Prosecutor v. Kupresick (Judgment), IT-95-16 (Jan. 14, 2000)
any potential harm caused by hostilities, regardless of whether they are initiating an attack or
are being attacked by an adversary.

The standard of protection envisaged under Articles 57 and 58 is that of ‘feasible

precautions.’ The phrase 'everything practicable' applies to all obligations in Article 57,
whereas the phrase 'to the greatest extent practicable' modifies the precautionary obligations
outlined in Article 585. By making the obligation to shield objects from the effects of
hostilities contingent on what is 'practicable' given the 'prevailing circumstances,' the
inference is that the evaluation of adherence is restricted to 'the factors and possibilities that
exist' as they were perceived by the State at the time, rather than being susceptible to
subsequent analysis based on additional information. Moreover, the notion of 'practicability'
implies that the determination of conformity with the duty to take precautionary measures
will depend, among other things, on the resources at the disposal of the State. Naturally, any
evaluation of resources should be reasonable and context-specific, taking into consideration
financial constraints, including those faced by the wealthiest of States and most sophisticated
western militaries6.

Addressing the norm conflict between FPS and obligations under Articles 57 and 58
regarding third party acts.

<military necessity v. proportionality>

<military necessity v. distinction>

5
Yves Sandoz et. al, Commentary on the Additional Protocols of 8 June 1977 to the Geneva Conventions of 12
August 1949, ICRC (1986) https://www.legal-tools.org/doc/6d222c/pdf.
6
K Trapp, Great Resources Mean Great Responsibility: A Framework of Analysis for Assessing Compliance
with API Obligations in the Information Age, in INTERNATIONAL HUMANITARIAN LAW AND THE CHANGING
TECHNOLOGY OF WAR (ed Saxon D, 2013).
 III. RAISING HOSTILITIES AS A DEFENCE IN INVESTMENT
ARBITRATION

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AAPL V. SRI LANKA7